Contracting Out
When the scheme was established, employers with final-salary pension schemes could choose to contract-out of SERPS, provided they gave scheme members a Guaranteed Minimum Pension. In return for opting out of SERPS the employer would pay reduced National Insurance contributions.
In 1988 members of money purchase pension schemes were allowed to opt-out for the first time. Instead of providing a Guaranteed Minimum Pension these schemes had to pay the saving in National Insurance contributions into the pension arrangement. To encourage the take-up of this arrangement the Government made an extra incentive payment into each pension scheme where somebody contracted out using this route.
Read more about this topic: State Earnings-Related Pension Scheme
Famous quotes containing the word contracting:
“When I hear the hypercritical quarreling about grammar and style, the position of the particles, etc., etc., stretching or contracting every speaker to certain rules of theirs ... I see that they forget that the first requisite and rule is that expression shall be vital and natural, as much as the voice of a brute or an interjection: first of all, mother tongue; and last of all, artificial or father tongue. Essentially your truest poetic sentence is as free and lawless as a lamb’s bleat.”
—Henry David Thoreau (1817–1862)
“Independence I have long considered as the grand blessing of life, the basis of every virtue; and independence I will ever secure by contracting my wants, though I were to live on a barren heath.”
—Mary Wollstonecraft (1759–1797)